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Donald Trump’s “breathtaking fiscal policy excess” and attacks on the Federal Reserve’s independence risk diminishing the US’s status as the ultimate safe haven for foreign investors, economists polled by the Financial Times have warned.

The poll, conducted by the Kent A Clark Center for Global Markets at the University of Chicago Booth School of Business, found that more than 90 per cent of economists surveyed were either somewhat concerned or very concerned about the safe-haven role of US dollar denominated assets over the next five to 10 years.

The White House insisted this week that Trump’s economic policies will help cut US debt as it made a final pitch to win over fiscal hawks in the Senate and get the president’s flagship tax bill over the line.

But independent estimates, including by fiscal watchdog the Congressional Budget Office, indicate the measures contained in the budget bill — which Trump has dubbed “the big beautiful bill” — will push the US federal debt past its previous post-second world war high later this decade.

While the dollar usually appreciates during bouts of global market panic, the sharp sell-off in global equity markets following Trump’s unveiling of aggressive reciprocal tariffs on April 2 was coupled with a depreciation of the US currency.

The benchmark S&P 500 has since recovered and is at an all-time high amid hopes that Trump’s economic policies will not derail growth or fuel inflation in the world’s largest economy.

“The safe-haven assets appear to be [the] Swiss Franc and gold. In fact, [the] US looks like an emerging market, whereby policy uncertainty leads to rising risk premia that drive long-term yields up and the currency value down,” said Saroj Bhattarai at the University of Texas at Austin.

The dollar is trading at a three-year low amid concerns over fiscal sustainability and question marks over the Federal Reserve’s independence, as Trump continues to attack chair Jay Powell over his reluctance to cut interest rates amid concerns that the global trade war could push up inflation.

“Breathtaking fiscal policy excess is all but guaranteed, and that invites, though hardly guarantees, a change of heart about dollar assets,” said Robert Barbera at Johns Hopkins University.

“Marry that emerging reality to a de facto White House takeover of the Fed — through a Powell firing or the championing of a hack as a Powell replacement? That would move me from somewhat concerned to very, very concerned.”

Powell’s term ends in May 2026 and speculation is rife that Trump could name his pick to replace him early in a bid to undermine the Fed chair.

“Fiscal deficits, deliberate government actions to shrink the US financial account and devalue the dollar, uncertainty about succession at the Fed and questions about Fed independence all negatively affect [the safe haven status of the dollar],” said Anna Cieslak at Duke University.

US Treasury yields, which usually fall in times of market volatility, rose in early April. While the benchmark 10-year yield has since fallen to about 4.3 per cent, many economists polled believe it could soon hit 5 per cent — a level that would spark concern within the Trump administration.

Almost three-quarters of the survey’s 47 respondents tipped the yield on 10-year debt to rise above 5 per cent by the middle of next year.

“US Treasury [bonds] might not be a safe asset any more,” said Evi Pappa at Universidad Carlos III de Madrid. “Look at what happened at ‘liberation day’ to the US 10 year versus European yields.”

Economists have become more gloomy on the US economic outlook since they were last polled in March.

The median expectation is now for the world’s largest economy to expand by 1.5 per cent over the course of this year, slightly down from an estimate of 1.6 per cent in the spring.

Separate surveys of economists and US households and businesses show that forecasts for growth and confidence sank rapidly after the April 2 tariffs were announced, but have since partially recovered on the back of the trade truce between the US and China and rises in equity prices.

Economists have also become more hawkish on price pressures, with the median expectations for core PCE inflation this year moving up from 2.8 per cent in March to 3 per cent in June, amid expectations that Trump’s tariffs would be passed on to US consumers.

But only a few respondents believed there was a more than 50 per cent chance of core PCE inflation exceeding 4 per cent and the unemployment rate simultaneously exceeding 5 per cent at any point between now and the end of 2026.

A better than expected reading for consumer price index inflation in May boosted hopes that less of the cost of tariffs than feared would be passed on to American shoppers.

But the annual figure for core personal consumption expenditures inflation in May, published on Friday, rose slightly to 2.7 per cent, from 2.6 per cent the previous month.

For now, however, investors have piled out of long-term U.S. bond funds at the fastest rate since the early days of the COVID-19 pandemic, according to calculations from the Financial Times. Net outflows from funds with government and corporate debt totaled nearly $11 billion in the second quarter, the FT found using EPFR data, a stark contrast from average net inflows of roughly $20 billion over the past 12 quarters.  

While such funds make up a small portion of the $28 trillion Treasury market, the exodus shows investors have become increasingly hesitant about long-term U.S. debt, said Miguel Laranjeiro, investment director for municipal debt at Aberdeen Asset Management.

“Usually, that’s because of fiscal policy rather than monetary policy, especially on the long end,” he told Fortune.

Still, he’s optimistic about what proposed regulatory changes could do for the market. Other fixed-income experts, meanwhile, warned not to look too far into the data, which can be volatile based on the timing of redemptions by various institutional investors.

“Near-term fund flows tell us very little other than validating near-term investor sentiment,” Bill Merz, head of capital markets research at U.S. Bank Asset Management, said in a statement to Fortune.

Yields rocked by deficit concerns

There’s no doubt the mood among fixed-income traders has been rocky, though. The yield on the 30-year Treasury, which rises as the market price of the bond declines, climbed above 5.1% in late May, hitting its highest level since the spring of 2007.

Concerns about America’s fiscal outlook have been front and center as Republicans work to pass President Donald Trump’s “big, beautiful” tax-and-spending bill, which the nonpartisan Congressional Budget Office estimates will add $2.8 trillion to federal deficits over the next decade.

The pending legislation proved the final straw for Moody’s, which in May became the last of the three major credit agencies to downgrade the U.S. from its top rung of borrowers. Goldman Sachs, meanwhile, partially validated the White House’s claim that higher tariff revenue and economic growth from tax cuts would slash the debt. But its path remains unsustainable, economists from the investment bank said, as America’s debt-to-GDP ratio approaches its post-World War II high.

Long-term rates have been on a largely slow and steady decline this past month, however. Recent inflation readings have come in relatively cool, perhaps convincing investors they don’t need as much compensation for the risk of surging prices eating into their returns.

But yields rose slightly Friday afternoon after the Commerce Department reported the Fed’s preferred inflation metric ticked higher last month as concerns remain about how tariffs will fuel price growth. And stocks got a brief shock when Trump said he had suspended trade talks with Canada.

Recent volatility has JoAnne Bianco, senior investment strategist at BondBloxx Investment Management, advising clients to avoid long-dated government debt, like 20- and 30-year Treasuries, all together.  

“You’re not seeing the long end—the ultra-long end—work as the safe haven that it might have in the past,” she told Fortune.

The return of the banks

Currently, insurance companies and pension funds, who have obligations to pay investors over long periods of time, are among the few “natural investors” in these types of securities, Laranjeiro said.

That may change, however, after the Federal Reserve moved this week to boost bank participation in the Treasury market by loosening capital requirements for major lenders. Industry leaders like JPMorgan Chase CEO Jamie Dimon have argued current restrictions, instituted to prevent a repeat of the Global Financial Crisis, are overly onerous and prevent banks from providing liquidity during times of market stress.

Such changes would not be without precedent, as the Fed also exempted Treasuries and bank reserves from the calculation of so-called supplementary leverage ratio—which curbs the amount of borrowed funds lenders can use to make investments—during the pandemic.

Laranjeiro thinks it’s a prudent move that can make government borrowing less dependent on foreign investors, whose holdings of U.S. debt are declining as a share of the overall market.

Thomas Urano, co-chief investment officer at Sage Advisory, agreed that boosting domestic demand for U.S. debt could offset concerns about the market’s ability to absorb increased issuance from the Treasury.  

“I think that’s what the bond market and the investor community [are] kind of pinning their hopes on,” he told Fortune.

And if this change can help make fixed income boring again, investors might come crawling back.

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The UK government has refused to say it is confident of winning its key welfare reform vote this week, as a significant number of rebel MPs are still threatening to try and kill the bill, arguing that ministers’ concessions do not go far enough.

Wes Streeting, health secretary, said on Sunday that the government was “in a better position” with its MPs after watering down changes to disability welfare reforms, but stopped short of saying it was confident it had the numbers after more than 120 Labour MPs threatened to rebel against the legislation.

The government has a working majority of 165 meaning about 80 Labour MPs would probably need to vote against the bill to defeat it, depending on abstentions and presuming the other parties oppose it.

“We’re in a much better position than we were last week,” Streeting told the BBC on Sunday morning, but conceded there was still “a lot of trust that needs to be rebuilt”.

The vote on Tuesday has become a key test for Prime Minister Sir Keir Starmer as he approaches the first anniversary of his time in office.

Starmer moved to soften reforms last week after the government looked set to lose the vote despite its huge majority. 

The government’s changes to the bill — including vowing not to take disability benefits away from people already receiving them — was seen as a significant U-turn by Starmer and critics have said it risks creating a “two-tier” welfare system with people that become disabled after the reforms risking losing out.

Starmer has argued reform is essential to stop the welfare budget spiralling ever higher, but the changes will reduce the savings for the government from almost £5bn to about £2bn. Combined with an earlier U-turn on winter fuel payments chancellor Rachel Reeves has been left with a £4.25bn hole in her budget.

A number of rebels said they are now prepared to back the bill but dozens are understood to be holding out, with many taking the weekend to think about their options.

A spokesperson for Downing Street declined to say if the government was “quietly confident” when asked, but pointed towards the fact a number of leading rebels had now agreed to back the vote after the concessions.

It said the picture would become clearer on Monday after the government sets out its terms of reference for the so-called Timms Review into disability benefits.

But to be so close to a potentially defining vote for the government without a clearer picture of the outcome is highly unusual, and points to the tensions and bad blood within Labour, with Number 10 widely viewed as having upset a significant number of backbenchers.

On Monday, the work and pensions secretary is due to make a statement to the House of Commons confirming the government’s planned changes to the reforms and laying out a review of the benefits with disability charities.

Changing the actual text of the bill at this stage is not possible, so MPs are being asked to take the ministerial statement as a promise that changes will be enacted at the next reading.

Paula Barker, Labour MP for Liverpool Wavertree who helped organise the rebellion against the bill, said that while it was “unquestionable” a number of opponents had been won over by the government “there are still many who will still vote against”.

“Some colleagues are waiting to hear what the minister says tomorrow,” Barker said. “The key issue is whatever written ministerial statement is tabled it won’t be on the face of the bill and trust is at an all-time low.”

MP Louise Haigh, one of the leading rebels, said on Sunday that she would now vote for the bill, arguing that a “significant number of concessions” had been made, but said the government had to learn from the crisis.

“I think this week’s crisis has been precipitated by a sense we weren’t being listened to . . . but the PM has accepted that a different approach needs to be taken and this is an opportunity to learn serious lessons,” Haigh told the BBC.

“There have been issues with both the economic policy and the political strategy that’s what drove so many colleagues to take this unprecedented step,” she added.

The Unite union, one of Labour’s biggest financial backers, on Saturday called on the government to scrap the bill with general secretary Sharon Graham calling it “divisive and sinister”.

“The government needs to drop its entire welfare bill and start again with the principle of social justice and helping people into work at its heart,” Graham added.